Australian PM announces carbon price countdown

Date

25 February 2011

Prime Minister Julia Gillard has announced that Australia will have a price on carbon in place from 1st July 2012. The initial price is intended to be fixed for three – five years, after which it will be replaced by a full emissions trading scheme – a transition “hard–wired” into its design.

At a press conference flanked by members of the Multi Party Committee on Climate Change, Julia Gillard said that she was determined to price carbon and was “not intending to take a backwards step” in the ensuing debate. This firm commitment complete with a specific time-frame is extremely positive news.

It sets clearly the direction of government climate policy. Since the three-time defeat and subsequent shelving of Kevin Rudd’s emissions trading scheme (ETS) in 2009, Government statements on climate change have been worryingly short on detail. With Thursday’s announcement, the Government has outlined one of the key building blocks to lowering emissions and transitioning to the more sustainable, prosperous, low carbon economy.

The announcement has been rightly welcomed by a significant portion of the business community as the first step to providing the certainty needed to make long term investment decisions.

Most of the detail is still to be decided – detail that will be crucial to determining if the plan can both survive the intense political debate that will surely come; and ultimately be successful in bringing down emissions and stimulating low carbon growth.

Crucially, we don’t yet know what the carbon price will be, or by how much it will rise once in place. Setting an adequate initial price and raising that price over time are both vital to underpinning the innovation and investment that will lower emissions.

Also to be decided are the arrangements for transitioning to a full emissions trading scheme and what the eventual cap will be - the specifics of which will be vital to ensuring confidence and certainty from business. How the government will deal with compensation for industry and households is another vital issue not addressed so far.

These questions and others will leave the Multi Party Committee on Climate Change a long and tricky list to get through this year.

The issue has a strong history of collateral damage in Australian politics. Since 2009 it has claimed one leader apiece from Labor and The Coalition with both Malcolm Turnbull and former PM Kevin Rudd owing much of their demise to climate politics.

This time around, the political numbers look better for the Government – but nothing is guaranteed. Labor’s majority in the lower house is built on an alliance with the Greens and three independent MPs: Tony Windsor, Rob Oakeshott and Andrew Wilkie.

The Greens have openly opposed the industry compensation package negotiated by Labor in 2009 for its ETS. Despite that opposition, Julia Gillard has said she considers them to be her starting point this time round. And though the three independents seem to be broadly on side, they have yet to give their formal support. Tony Windsor in particular will take some persuading, stressing yesterday that “nothing is settled” in his view.

In the Upper House, a new Labor-Green majority will replace the current Coalition majority when the new Senate takes its seats as of the 1st of July, making the passage of any bill more likely, but still far from assured.

Internationally, the announcement is certainly a step forward. Since Cancun, countries’ domestic actions on climate change are increasingly seen as the most likely basis for any international agreement. While Australia’s five per cent emissions reduction goal is still significantly lower than IPCC targets, it does show that Australia’s commitment to some domestic action is still alive and kicking – an essential message for other countries. The announcement will also ensure Australia retains some leverage at the negotiating table.